Overall revenue growth in the first three quarters was positive, and Q3 profits were under pressure in the short term. The company achieved operating income of 0.835 billion yuan in the first three quarters of 2024, an increase of 1.95% year on year; realized net profit of 0.169 billion yuan, a year-on-year decrease of 5.29%; realized net profit of 0.161 billion yuan after deduction, a year-on-year decrease of -0.79%. The decline in the company's profit was mainly due to short-term pressure on Q2 and Q3 profits. Looking at a single quarter, the company achieved revenue of 0.278 billion yuan in 2024Q3, a year-on-year decrease of 2.06%; realized net profit to mother of 0.054 billion yuan, a year-on-year decrease of 10.67%. We believe that the company's downstream is in the repair range, demand will gradually be transferred to the bearing sector, and profit growth is expected to improve rapidly.
The gross margin remained at a high level, and the expense ratio declined steadily during the period. The company's overall gross margin for the first three quarters of 2024 was 34.82%, a slight decrease of 1.00pct from the full year of 2023. The company's gross margin has continued to recover upward since 2022, and business structure optimization brought about by applications in automobiles and new fields has gradually been realized. On the cost side, the company's expense ratio for the first three quarters of 2024 was 10.93%, a slight decrease from the full year of 2023. Since 2019, the cost rate has declined year by year, reflecting the company's strong level of fee control. Looking at the breakdown, the company's sales expense ratio, management expense ratio, financial expense ratio, and R&D expense ratio for the first three quarters of 2024 were 1.96%/6.13%/-1.51%/4.35%, respectively.
Demand in traditional industries is in an improvement range, and robot applications are expected to bring in all new volume. In terms of automobiles, from January to September 2024, domestic automobile production and sales reached 21.47 million vehicles and 21.571 million units, respectively, up 1.9% and 2.4% year-on-year, according to the Passenger Federation data. In terms of construction machinery, according to data from the China Construction Machinery Industry Association, in September 2024, China sold 15,831 excavators of various types, an increase of 10.8% over the previous year. It exported 7,610 units in China, up 21.5% year on year; exported 8,221 units, up 2.51% year on year. In addition, according to the company's 2024 semi-annual report, the company is cooperating with several robot OEMs and related suppliers and providing samples, mainly for the application of sliding bearings in joints. The sliding bearings developed by the company help robots reduce weight and reduce costs.
Profit forecasting and investment advice. We expect the company's 2024-2026 revenue to be 1.214/1.473/1.856 billion yuan, net profit to mother 0.251/0.299/0.367 billion yuan, and the PE corresponding to the current market value is 20.5/17.2/14.0X. The company is a leading domestic self-lubricating bearing company. It is expected to benefit from wind power bearing “sliding” and robot industry trends, has upward elasticity in profit and valuation, and maintains a “buy” rating.
Risk warning: risk of macroeconomic fluctuations; risk of fluctuations in raw material prices; risk of exchange rate fluctuations.